Commercial Recoveries
In some commercial leases, tenants are responsible for rent and a share of the property expenses (typically maintenance, taxes, and insurance). Recouping the expenses is referred to as "recoveries".
Tenants pay a monthly estimate charge for the property expenses, the expenses are tracked in recoverable expense accounts, and at the end of the year, a reconciliation is done.
The tenant's share of the actual expenses is calculated.
The tenant's share is compared to the estimate charges the tenant has paid.
If the expenses are greater, an additional charge is created for the tenant. If the estimates are greater, the tenant gets a credit.
Implementation in Breeze
In Breeze, recoveries are implemented as follows:
1. On the Company screen, you designate that your portfolio contains commercial properties. And when you set up a property, you designate it as "commercial" property.
2. When you set up tenants, there is a section of the screen for the recovery setup. This includes charge codes, expense pools, estimate charges, and so on.
3. When you create payables for expenses that you want to recover, you select recoverable expense accounts.
4. At the end of the year, you run a reconciliation report and create the balancing charges/credits to the tenants.